RAKUS Co., Ltd.

In the internet industry, new technologies are developed and introduced frequently, and if the Group falls behind in responding to technological innovation, there is a risk that the competitiveness of its services will decline. In particular, the rapid advancement of AI technologies, including generative AI, may significantly change the competitive landscape for existing services in a short period of time, as new AI-driven services emerge and other companies accelerate operational efficiency and automation. The Group strives to keep abreast of new technology trends and proactively considers and adopts the application of AI technology to operations and products, thereby seeking to mitigate this risk and accelerate business growth.

Stable provision of cloud services is heavily dependent on internet communication networks and cloud infrastructure. A sudden surge in access, power outages, increasingly sophisticated cyberattacks such as ransomware and zero-day attacks, or data tampering or leakage caused by errors on the part of employees or outsourcing partners could lead to service outages or damage to the Group's social credibility. The Group works to mitigate this risk through regular vulnerability assessments by third-party organizations, obtaining external certifications such as ISMS, establishing a CSIRT, and conducting regular training and drills.

The Group handles confidential information and personal information of numerous client companies. Although management and protection are implemented based on the Information Security Basic Policy, if important information assets were to be leaked externally, it could result in a loss of social credibility and claims for damages, potentially having a material impact on the Group's business and performance. The Group works to mitigate this risk through obtaining external certifications such as ISMS and PMS, establishing a CSIRT, and conducting regular training and drills.

Servers storing customers' information assets are managed in a distributed manner across Tokyo and Osaka, but if a disaster or accident causing damage to data centers or network facilities occurs and results in the loss of information assets or the inability to maintain service provision, this could affect the Group's business and performance. The Group regularly conducts response drills for large-scale outages based on BCP scenarios, data restoration tests, backup of all customer data to physically separated servers, and backups to different geographic locations.

IT investment has remained resilient, partly due to responses to the invoice system and the Electronic Bookkeeping Act, but uncertainty in economic conditions, heightened cost awareness due to rising interest rates, and geopolitical risks may affect client companies' investment decisions. If decisions on IT implementation or renewal are postponed, this could affect the Group's business and performance, and measures to address such changes in the macro environment are limited. The Group seeks to mitigate this risk by closely monitoring trends and responding appropriately to changes.

While recruiting and developing specialized talent is essential for business expansion, if intensifying competition for talent makes it difficult to hire excellent personnel, or if there is a significant outflow of existing employees to other companies, this could affect the Group's business and performance. The Group seeks to mitigate this risk by disclosing its Human Rights Policy, DEI Policy, and Occupational Health and Safety Policy, and by promoting appropriate human capital management.

The expense settlement system "Rakuraku Seisan" and the document issuance system "Rakuraku Meisai" account for a large proportion of the Group's net sales. If sales of both services were to decline significantly due to intensifying competition with rival products, this could significantly affect Group performance. The Group seeks to reduce this dependence by balancing its service portfolio through the development of new services that follow these two services, and by improving the profitability of each service.

The Group recognizes goodwill and customer-related assets arising from corporate acquisitions, and these may increase further with future M&A activities. If value impairment occurs due to changes in the business environment or deterioration in profitability, this could affect performance through the recognition of impairment losses. The Group addresses this through detailed due diligence at the time of acquisition, promotion of early PMI (post-merger integration), and regular monitoring of business progress.

As a telecommunications carrier, the Group provides communication services based on the Telecommunications Business Act, and there is a possibility that regulatory tightening that impedes business development may occur due to changes in social conditions. In addition, if changes in accounting, tax, labor, or other regulations require significant modifications to the services provided, this could affect the Group's business and performance. The Group seeks to mitigate this risk by closely monitoring trends in legal and regulatory changes and responding promptly.

In the cloud services market, technological barriers to new entry are not necessarily high, and as the market matures, price and functionality competition is intensifying further. The emergence of superior alternative products from large companies with financial strength and brand power, or aggressive customer acquisition measures by competitors, could lead to the cancellation of existing customers or the loss of opportunities to acquire new customers. The Group seeks to mitigate this risk by leveraging first-mover advantages, closely monitoring market trends, and implementing appropriate competitive measures.